Treasury Inspector General for Tax Administration

Press Release

TIGTA Report on Federal Tax Liens Finds IRS Lien Determinations Were Untimely or Inappropriate for Some $1.4 Billion in Taxes Due

WASHINGTON - The Internal Revenue Service made untimely or inappropriate lien determinations for more than $1.4 billion in delinquent taxes, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS protects its claims against taxpayers who owe delinquent taxes by filing Federal tax liens. These liens establish the IRS's priority among secured creditors for the taxpayers' equity. Liens are generally filed on balance-due cases in which the taxpayer has received a notice demanding payment and has neglected or refused to pay.

The IRS can decide not to file liens when a taxpayer is in bankruptcy, has died without assets, when a corporation is defunct and miscellaneous other categories. Revenue officers are required to document a decision on whether a lien should be filed and include an explanation when they are not filed.

Revenue officers are supposed to attempt initial contact with a taxpayer or taxpayer's representative within 45 days after they are assigned the taxpayer's modules. A module refers to one specific tax return filed by the taxpayer for one specific tax period (year or quarter) and type of tax (i.e., individual, corporate, employment, excise, etc).

According to the report, the IRS did not make lien determinations for 210 open modules at two collection field offices representing a balance due of $6.4 million. In addition, IRS revenue officers did not document valid reasons for not filing liens when closing as "currently not collectible" an estimated 2,297 modules, with $72 million in delinquent taxes.

The report also found that liens were not filed on shelved modules within a certain dollar threshold, even though an IRS study has shown a benefit in doing so. TIGTA's analysis found that between 2002 and 2008, the IRS shelved, without filing liens, modules representing approximately $1.4 billion in delinquent taxes. Shelved modules are placed in a currently not collectible status and no collection work is conducted.

"The IRS must ensure the appropriate handling of lien determinations," said J. Russell George, the Treasury Inspector General for Tax Administration. "Failure to protect the Government's interest on taxes that are owed creates an unfair burden on taxpayers who properly pay their taxes in full and on time," he said, adding: "I am pleased that the IRS has agreed with our recommendations to address the identified shortcomings."

TIGTA made eight recommendations that the IRS ensure that revenue officers document their reasons for not filing liens against delinquent taxpayers and ensure that timely lien determinations are made. The IRS agreed with TIGTA's recommendations.